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OCR for page 23
Appendix A
The Views of Agency Representatives on
the Nature and Causes of Budget-Related
Problems in Federal Construction Programs
~ order to get a clear picture of the problems of
federal agencies with early estimates, He commit-
tee asleep the agency liaison members to provide
data and expressions of views on the subject Be-
cause agencies are especially al to and con-
strained by congressional approbations, the liai-
son members were asked to focus on the budget
estimates used to seek appropriations.
The desired information was obtained at a spe-
cial meeting of the liaison members. The agencies
represented were the Anny, Navy, Air Force, Vet-
erans A~ninis~tion, Asian Heals Service, and
National institutes of Health. The participants pro
vided infonnation primarily on the basis of their
personal experience and knowledge.
Id order to help the participants approach a con-
sensus on the issues, a modified version of the
"Delphi" technique* was employed. Specifically,
the participants were asked first to answer venous
questions of which were framed to elicit re-
sponses in He form of percentages—separately in
writing. Next the responses of all participants were
*The Delphi tec}mique is a systematic procedure for
generating a reasoned consensus Tom die individual
judgments of a group of experm. Lee technique was first
used for long-range forecasting by He RAND Corpora-
tion. As described by Helmer (1968), He Delphi tech-
nique is an interactive process in which a group of ex-
perts first Moe ~n~pendent estimates of a numerical
value (e.g., a year) and Men narrow He spread in Heir
estimates through a series of reviews and revisions of
their individual estimates.
23
revealed, averages were calculated, and He partici-
pants were asked to justify estimates that were far
Tom the mean. Finally, after He responses to each
question were discussed, the participants were given
an o~ormnity to change their answers (which they
often did), and new averages were calculated.
The participants were asked to provide informa-
tion on five issues:
1. the percentage of major cons~uchon projects
on which problems are encountered with budget es-
timates,
2. the effects of budget estimating problems,
3. how budget estimating problems are solved,
4. the causes of budget estimating problems, and
5. the percentage of initial low bids within vari-
ous percentages of budget estimates.
The results of the exercise are summarized in
Figures A-1 Trough A-S, which correspond to He
five issues mentioned above. ~ each figure the
judgments of the participants are shown both as
overall average estimates and as ranges of esti-
mates.
With regard Figure A-1, the participants were
instructed to consider the entire spectrum of serious
difficulties that could occur on a federal construc-
tion project as a result of a budget-related problem.
Consequently, He percentages shown are higher
Han they would have been if the participants had
been asked to estimate, for example, the percentage
of contracts that cannot be awarded the first time
Hey are advertised due to excessive bids.
OCR for page 24
24
Percent
0 5 10 15 20 25 30 35 40 45 50
l
1
Overall Average
Range of Estimates
Figure A-1 Agency estimates of the percentage of construction projects on which budget-related problems are
encountered.
APPENDIX A
Percent
0 10 20 30 40 50 60 70 80 90 100
Embarrassingly
Low Bids
Failure to Award
Construction Contract
Design
Problems
Failure to Award
Design Contract
Project Delays
rim I I ~ I ,
/////////
-
~/i////D~
///////////////
,
J:
1 1
,,,,
l
Figure A-2 Agency estimates of percentages (shown as ranges and overall averages) of budget-related problems Mat
manifest themselves in venous ways.
When providing input on the effects of budget-
related problems (Figure A-2), survey participants
were asked to estimate the percentage of problems
that result in or manifest themselves as:
1. Embarrassingly low bids. Agency officials
are embarrassed, and subject to criticism, when the
low bid on a project is far below the budgeted
amount. There are many competitors for federal
funds, and when funds allocated to one project are
not used, managers and sponsors of other programs
are annoyed because they view the unspent funds
as wasted.
2. Inability to award a construction contract
because no responsive bids are low enough to per-
mit an award. Eventually, almost all projects are
constructed, but some percentage of projects can-
not be awarded the first time they are advertised.
3. Design problems; for example, the design
organization reports in the course of the design
phase that it cannot design a facility that meets the
criteria for the amount of funds available. Other
less serious design problems are of course dealt
with routinely during every design effort.
4. Inability to award a design contract because
the selected design firms all indicate that the type
of facility desired cannot be built without addi-
tional funding.
5. Project delays. These may be due, for ex-
ample, to design problems and/or to the need to re-
advertise.
The slim of the estimated percentages shown in
Figure 2 exceed 100 percent because budget-re-
lated problems can manifest themselves in several
ways. For example, delays are a coincident effect
of a large percentage of budget-related problems.
When providing input for Figure A-3, the agency
participants were asked to estimate the percentage
of budget-related problems that are solved by:
· redesigning the project, with or without a
change in scope or criteria;
· a formal value engineering (or similar) analy-
OCR for page 25
APPENDIX A
sis by a team that is not a part of the design organi-
zation;
· developing alternate bid items;
· obtaining an increase In the budget for the
project through '`reprogramming" (i.e., using money
appropriated for over projects, with congressional
approval);
· obtaining an increase in the budget for the
project through a change in the ap~opria~d amount;
and
· dropping the project from the current pro-
gram and adding it (with an increased budget) to
the program for a subsequent year, or dropping the
project entirely.
It will be noted that no percentages are given for
the last option mentioned above (dropping a proj-
ect) because the representatives all reported that
their agencies almost never solve a budget problem
by either dropping a project entirely or deferring it
until a later year.
When discussing the causes of budget estimat-
ing problems (Figure A-4) the participants were
asked to estimate the percentage of problems that
are caused by:
· inexperienced or inadequately trained agency
estimators,
· inexperienced or inadequately trained estima-
tors employed by private A-E funs (which actually
prepare a large percentage of government budget
estimates),
· inadequate budget estimating procedures and
methods,
Redesign
Value
Engineering
Alternate
Bid Items
Reprogramming
Increased
Appropriation
25
· arbitrary reduction in budget estimates in order
to conform to general cost limits or guidelines (such
as the Cost Estimating Guidance for Military Con-
s~uction),
- · arbitrary reductions in budget estimates by
agency managers or budget officers,
· arbibary reductions in budget estimates by
Congress,
· insufficient or inaccurate cost data,
· insufficient time in He budgeting process to
prepare accurate estimates,
· the need to prepare budget estimates before
designs have been completed,
· poor definition of needs by user organiza-
tions,
· poor design work by private A-E firms, and
· poor management of ibe design process by
construction agencies.
It will be noted that, as in Figure A-2, the sum of
the percentages for the various causes exceeds 100
percent. The reason, of course, is that Here are
sometimes multiple reasons for budget estimating
problems.
With regard to Figure A-5, the participants were
asked to indicate the percentage of initial low bids
(i.e., low bids received the first time a project is
advertised) that are within a certain range of the
original budget estimate: from 20 percent under to
20 percent over, in increments of 5 percentage points.
It should be noted that different agencies have dif-
ferent policies regarding how much a low bid may
exceed the appropriated amount without necessitat-
ing re-advertising.
Percent
0 10 20 30 40 50 60 70 80 90 100
Figure A-3 Agency estimates of percentages (shown as ranges and overall averages) of budget-related problems Mat are
solved by various means.
OCR for page 26
26
~rE=wA
Percent
0 10 20 30 40 50 60 70 80 90 100
Poor Agency
Estimators
Poor A-E
Estimators
Inadequate
Estimating Procedures
Inadequate
Estimating Data
Reductions to
Meet Guidelines
Reductions by
Agency Managers
Reductions by
Congress
Inadequate
Time for Estimating
Need to Prepare
Estimates too Early
Poor Definition
of User Needs
Poor Design
Work
Poor Agency
Management
t I I ~ I I I 1: . I
-
~/////~/////~/~
,=/.///~/////~:'
, ... . ..
i///
-
1-
W~7///~/////~//~7/~
:..,.-...:
Figure AN Agency estimates of percentages (shown as ranges and overall averages) of budget-related problems Cat are
caused by various factors.
OCR for page 27
PE~DIX A
LOW BIDS VS.
BUDGET ESTIMATES
More than 20% over
15% to 20% over
10% to 15% over
5% to 10% over
Up to 5% over
Up to 5% under
5% to 10% under
10% to 15% under
15% to 20% under
More than 20% under
27
Percent
0 10 20 30 40 5Q
1 1 1 1
~////////////~//////////////// 1
~ 1 7 1 1 1 1
////////i/////////~/////////////:
////////////////~////////////////////////////////////// 1
/~//i////////////////////////~
////////////////~////////////////////~
//////////////
////////////~////////////:
-
~//////////////~///////////////////////~
Figure A-S Agency estimates of percentages (shown as ranges and overall averages) of low bids that are within various
percentages of budget estimates for projects.
OCR for page 28
Representative terms from entire chapter:
low bids
